Penalty under Rule 96ZQ(5) is discretionary, and later abatement did not retrospectively change the March 1999 computation.

Rule 96ZQ(5) was treated as creating liability to penalty, but not as compelling an automatic penalty equal to the entire duty outstanding in every case; the authority retained discretion to impose a lesser amount where the circumstances justified it. A later abatement order, granted after the relevant month, was not accepted as operating retrospectively to alter the March 1999 penalty computation, yet the factual setting showed no deliberate delay and operational difficulties in monthly payment, warranting reduction of the penalty to a nominal figure.

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Issues: (i) Whether the penalty under Rule 96ZQ(5) of the Central Excise Rules, 1944 was mandatory and had to be equal to the duty amount outstanding. (ii) Whether the subsequent abatement order could affect the quantum of penalty for the month of March 1999.

Issue (i): Whether the penalty under Rule 96ZQ(5) of the Central Excise Rules, 1944 was mandatory and had to be equal to the duty amount outstanding.

Analysis: The provision for interest and penalty was examined alongside the language of Section 11AC of the Central Excise Act, 1944 and the provisions for interest under Sections 11AA and 11AB of the Central Excise Act, 1944. The rule used the expression that the processor "shall be liable" to penalty, but the wording did not compel automatic levy of the full outstanding amount in every case. The mandatory nature of interest did not, by itself, make the penalty rigidly equivalent to the duty amount. The view that the adjudicating authority had no discretion was therefore unsustainable.

Conclusion: The penalty under Rule 96ZQ(5) was not required to be imposed as an equivalent and mandatory penalty in every case.

Issue (ii): Whether the subsequent abatement order could affect the quantum of penalty for the month of March 1999.

Analysis: The abatement was granted only later, in December 1999, and was based on closure of the stenter during March 1999. The Tribunal did not accept the plea that the abatement should operate backwards to alter the penalty computation in the manner suggested. However, the factual background showed that the delay was not deliberate and that part of the amount was affected by internal operational difficulty and the nature of the monthly payment mechanism. These circumstances justified reduction of the penalty to a nominal amount.

Conclusion: The abatement order did not warrant the proposed adjustment, but the penalty was still liable to reduction to token amounts.

Final Conclusion: The penalties were reduced to Rs. 5,000 in each case and the appeals succeeded to that extent.

Ratio Decidendi: Where the statutory language creates liability to penalty but does not expressly mandate equivalent penalty in every case, the adjudicating authority retains discretion to impose a lesser penalty having regard to the circumstances of the delay.

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